Whilst my ex Hay colleagues focusing on Executive pay wouldn’t appreciatew this view from Henry Mintzberg, I loved it.
Henry Mintzberg wrote a piece in the Wall Street Journal about the negative impact of bonuses in organisational performance. In typical fashion, Mintzberg does not mince his words;
“Executive bonuses—especially in the form of stock and option grants—represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy.”
The key problem that Mintzberg identifies is the use of financial indicators as the sole gauge of a company’s health.
Mintzberg argues that companies are far too complex and the factors influencing their performance too subtle and wide ranging to be accurately understood by traditional financial measures.
“This flawed assumption, though, does far more damage than simply distorting CEO compensation. All too often, financial measures are a convenient substitute used by disconnected executives who don’t know what else to do—including how to manage more deeply.”
Thank you to Bruce Lewin of Four Groups for this little gem.